AT&T, Verizon: Business Segment Suffers Worse than Consumer

Verizon Communications and AT&T arguably took bigger hits to their enterprise than consumer segments as a result of the recession, second quarter financial results suggest.

Revenue from Verizon’s global enterprise business dropped 6.7 percent while the wireless customer segment revenue grew 27.7 percent. Even consumer wired services revenue grew 13.7 percent in the second quarter.

AT&T also reported that the deepest economic impacts in the second quarter came in the business services segment.

AT&T CFO Richard Lindner likewise says total business revenues, including enterprise, wholesale, small and mid-sized customers, were down 5.6 percent year over year. Excluding equipment sales, business revenues were down 4.3 percent, Lindner says.

Wireless revenue was up 10.1 percent, on the other hand, while total wireline consumer customer revenues were $5.4 billion in the second quarter, compared with $5.7 billion in the year-earlier quarter and essentially flat, down only $11 million, versus the first quarter of 2009.

"We’ve seen pressures across business product lines but the largest impacts are volume related in traditional voice and legacy data products," says Lindner. "The sectors where we’ve seen the most impact, as you would expect, are in finance, transportation, and manufacturing."

Consumer broadband and video are helping both AT&T and Verizon, while it appears legacy business products are suffering. Newer services including Ethernet, VPNs, hosting, IP conferencing and applications services grew 15.2 percent year over year.

In an economy where consumer spending drives roughly 75 percent of activity, one might have suspected consumer revenue would be harder hit. Instead, it appears massive job losses have crimped business segment spending the most.

50% to 60% of New Prepaid Wireless Users Will Never Go Back to Post-Paid

Prepaid wireless clearly is growing. In the first quarter, for example, about 61 percent of the new net customers T-Mobile added were prepaid accounts. In the fourth quarter of 2008, T-Mobile added 57 percent prepaid accounts. In the first quarter of 2008 T-Mobile added 25 percent prepaid customers.

So the big question is what those customers might do once the recession is over and there is less need to watch spending on mobile and other communications and entertainment services.

Wireless analyst Chetan Sharma thinks it is possible that "it is quite likely that 50 percent to 60 percent of such consumers don’t go back to postpaid."

For major wireless providers, this will mean a decline in average revenue per user. For prepaid providers, the trend will mean continued opportunities to take market share from postpaid providers.

The other trend is that although prepaid traditionaly has been viewed as a niche segment for lower-income customers, that could be changing. Lots of customers who traditionally have used postpaid plans might find they can get along quite nicely using prepaid.

Over time, even smart phone customers will find they are able to buy prepaid service that allows them to use higher performance, later model devices with prepaid plans.

Mobile Streaming Video Grows 58% Last Quarter

Worldwide mobile data bandwidth usage has grown 30 percent during the second quarter of 2009, says Allot Communications. Asia leads the growth with 36 percent; Europe posted 28 percent growth and the Americas 25 percent.

Heavy data users do not distinguish between their fixed and their mobile networks and seem to expect the same service from the Internet, irrespective of their access method, the report says.

That is going to be a problem, for the same reason a small percentage of heavy users create performance issues for all other users, one might reasonably conclude. The other issue is that the fastest-growing traffic type is streaming video, which grew 58 percent during the quarter. Since streaming video requires 100 times the bandwidth of a voice call, you can imagine what the problem is.

The other issue is that mobile traffic is not evenly distributed: some locations get dramatically more demand than others. Peer-to-peer traffic, for example, accounts for 42 percent of bandwidth utilization in the busiest cells on the network, but only 21 percent in the average cell.

Since mobile licenses are awarded in ways that mean usable bandiwidth in any one location is limited, fancier engineering, higher network cost and more-sophisticated traffic engineering are required at some cell sites, though others might manage just fine.

Internet Rivals TV as Top Leisure Pursuit

The Internet now rivals TV as a favorite leisure activity, say researchers at Frank Magid Associates (click image for larger view). And computer or game consoles are not far behind.

Broadband Adoption is Not Just about Availability

Some observers think broadband adoption is primarily a matter of availability. It is important, but it is not the only important factor.

Even if every home and business in every OECD country were wired with a broadband connection, the United States "per capita" rank would actually fall to 20th, because of differences in the size of households in each of the countries.

In other words, "America would be 100 percent broadband saturated and yet our standing would plummet because the OECD ranks on a per capita basis rather than per household," says Federal Communications Commission Commissioner Robert McDowell.

In Spain, for example, 28 percent of people flatly say they "do not want" broadband. About 15 percent of homes do not own a computer.

About 13 percent of surveyed consumers say they do not find the Internet "useful."

S0me 12 percent say they do not have time to use the Internet and 10 percent say they do not know what the Internet is. Only four percent of non-users say it is "too expensive."

So the main reason non-users are not buying broadband access services is that they do not see the Internet's usefulness and value.

Questions about Zer01, Buzzirk

Nancy Gohring , a reporter fror IDG News Service, has raised some uncomfortable and so far unanswered questions about Zer01, the new prepaid mobile service launched by United Technologies Group and sold by channel partners including Buzzirk. The service promises unlimited voice and data for $70 a month, with no contract.

But Gohring says "what little information is available about the services is vague, technically inconsistent, and doesn't match up with public records."

And that's the least of the issues. Anybody thinking about becoming a distributor probably should read this as part of their due diligence. It's a heck of a piece of reporting and research.

http://www.networkworld.com/news/2009/072009-zer01s-mobile-offer-may-be.html?page=1

Ad Market Recovery in 2010?

Perhaps we all are anticipating too much "normalcy" from the current recession and recovery. But PricewaterhouseCoopers (PwC) expects a 2010 recovery.

PwC says worldwide advertising spending will reach $421 billion 2009.

The bad news is that figure is down 12.1% from 2008, which saw $479 billion in spending.

Fortunately, PwC expects the online and mobile (which it treats as one category) and video game ad spaces to rebound in 2010 with five-year compound annual growth rates of 7.7% and 13.8%, respectively.

PwC expects all global media markets to see a rise in spending by 2012. Recovery will not be evenly spread around the world, however. Total ad spending in North America compounded annually will decrease by 1.6% from 2009 to 2013.

Online, mobile and video game advertising will see 6.4% and 13% compound annual growth rates, respectively, over the five-year period.

Online and mobile advertising spending, down in 2009, will rebound in 2010. North America will see overall advertising spending rise in 2011.

Ninety-four percent of North American advertising spending will come from the United States.

No Inflection Point for Interactive Media, Yet

Nothing is going to replace search advertising as the top interactive category, just as nothing appears able to dislodge display advertising, between now and 2014 or so.

And though interactive advertising is growing, it will not displace offline alternatives, either.

By 2014, all interactive channels together will account for about 21 percent of total ad spend.

That is not to say greater changes are unlikely. One of the enduring lessons of "disruptive" change is that there is a sometimes long gestation period before an inflection point is hit. Then the change goes non-linear and vast changes can occur very quickly.

Nobody knows yet if that is what lies ahead for advertising. But it bears watching, as 2009 seems to have marked something of a watershed for print media, for example.

U.S. Internet Growth 3% to 2013

The total number of people online will grow by over 45 percent to 2.2 billion users — with much of that growth occurring in Asia — over the next five years, according to Forrester Research.

Asia remains the biggest global Internet growth engine: 43 percent of the world's online population will reside in Asia by 2013, with 17 percent of the global online population in China.

Growth rates in the US, Western Europe, and the major industrialized nations in Asia Pacific such as Australia, Japan, and South Korea will slow to between one percent and three percent.

That is a significant finding, as it suggests most people who want to use the Internet already do so.

Online penetration in the United States will rise from 73 percent to 82 percent over the next five years, representing about a three percent annual growth rate.

By 2013, U.S. online penetration will be on par with the most highly penetrated markets of Europe and Asia, such as the Netherlands, the UK, Japan, and South Korea.

By about 2013, if not before, there also will not be any material difference between people using the Internet and people using broadband, other analysts project. That should lead policymakers to take a harder look at the costs and benefits of any programs designed to "increase" use of broadband access.

The United States is about at the point where non-use of broadband is directly linked to non-use of broadband.

http://www.forrester.com/ER/Press/Release/0,1769,1296,00.html

Mobile Marketing Second Only to Web Among Top Ad Agency Execs

Though mobile marketing spending lags far behind combined Web advertising, mobile marketing has become quite interesting to many advertising excutives recently.

Where a third of executives say Web channels are most popular, mobile campaigns are second, at 15 percent.

That is interesting as mobile campaign spending is perhaps one percent the size of search advertising, for example.

Traditional methods, including TV, print and direct mail, are in single digits.

To the extent that spending ultimately follows interest, mobile campaigns should skyrocket, despite the currently limited amount of spending in the category.

Search Still Will Lead 2014 Interactive Marketing Channels

Search will remain the single largest interactive marketing channel in 2014, and online display will keep its second-place status among marketers.

But social media marketing will show the highest growth rate, passing email marketing.

Mobile marketing also will grow by an order of magnitude.

What Are New Satellite Phone Operators Up To?

New satellite communications operators TerreStar Networks and SkyTerra Communications plan to offer dual-mode (satellite and cellular) services in North America to dual-mode smart phones aimed at a niche market of public safety, law enforcement and government users.

Based on past experience, one might wonder whether that market opportunity is big enough to support much of a business for both providers.

ABI Research, for example, suggests three million satellite-capable LTE smartphones will be shipped in North America in 2012. But there might be something more going on here.

The Federal Communications Commission allows satellite operators to offer simultaneous satellite and cellular services over their licensed satellite spectrum. That suggests a possible play as a fourth-generation access play in rural markets where it is very expensive to supply such capability.

“We believe that the greenfield satellite companies’ plan is to forge short-term roaming partnerships with AT&T and other cellular operators and then, when LTE services are deployed, position themselves to be acquired by these major players, including their prized spectrum," says ABI Research practice director Kevin Burden.

Danger for Service Providers If Confidence Doesn't Climb

Led by a dramatic decline in the expectations of U.S. consumers for the near future of the U.S. economy, the most recent results of the Royal Bank of Canada Consumer Attitudes and Spending by Household Index show a marked downward shift for July 2009, continuing the slide begun last month.

"Consumer confidence is resetting to the levels seen earlier this year and is likely to remain there until there is concrete evidence of a turnaround, "says RBC Capital Markets Managing Director Larry Miller.

Should those trends continue, service providers will have to worry anew that relative stability in communications and entertainment servcies markets will take a hit more pronounced than what they have seen to date.

So far, there seems to be minor damage to broadband access revenues and a growing trend to substitute prepaid for postpaid mobility. Some surveys suggest only a few percent of broadband subscribers say they actually have cut off service. A recent Strategy Analytics survey suggests 10 percent would consider reducing broadband if they had to cut somewhere.

As many as 19 percent say they would consider abandoning mobile service, though there is little if any evidence users actually have done so, at that level. Most other surveys show little if any actual termination behavior.

About 19 percent of respondents to the Strategy Analytics poll say they would consider dropping their multi-channel entertainment service, but again, actual behavior does not support moves of that scale.

Still, a prolonged "scrape along the bottom would increase pressure on consumers to move more aggressively. And the RBC survey suggests that might just be the case.

After four consecutive months of rising hopes that the economy would turn around in the next six months, the longest such increase in expectations since the launch of the index in 2002, many Americans are coming to grips with the idea that it may still be some time before things get better, Miller says.

Apple iPhone, BlackBerry are Most-Profitable Mobile Devices

Just two mobile devices account for the overwhelming share of global handset profits, says Deutsche Bank analyst Brian Modoff. Between them, the two devices account for 35 percent of global mobile operating profits despite representing just three percent of global market share.

In 2009, the two devices will move up to five percent market share but claim 58 percent of

total operating profits.

Smart phones hold only about 13 percent of total cellphone sales globally, but are growing, despite a drop in the broader cellphone market in the first quarter.

The iPhone, which is exclusive to AT&T, draws the fattest subsidy at about $400 a phone, Modoff said. BlackBerries draw subsidies averaging $200 from U.S. operators. Basic cell phones get a $100 subsidy. Manufacturers of basic phones make next to nothing, unless they have enormous scale.

Nokia, the industry leader, manufactured 46 percent of the units sold last year but earned 55 percent of the profits, Modoff estimates.

5% of U.S. Universities, Colleges Have Deployed Unified Communications Campus-Wide

About five percent of U.S. university and college campuses already have deployed unified communications campus-wide, according to a recent survey by the Association for information Communications Technology Professionals in Higher Education. Another four percent of respondents say they have extensive deployments, but to a limited number of people.

About 44 percent report having limited deployments or trials underway. About 26 percent are in planning stages. About 20 percent have no UC projects or planning underway.

The survey featured responses from 103 institutions.